Only the banks can lift the gloom on the home front

After the long housing binge, the long bust. Eighteen months after the credit crunch began, barely a day passes without negative headlines on the home front. On Friday housebuilding was reported at its lowest point since 1980; on Saturday repossessions were running at a 12-year high and buy-to-let mortgages at a five-year low. By Monday ministers had reversed their commitment to run down Northern Rock's mortgage book and plunged the recovering state-owned bank into a £14bn sales drive to help end the 50% fall in new mortgages. How much further has the market still to fall?

Labour, like its Tory predecessors since Margaret Thatcher first stumbled upon the right to buy one's council home in the 80s, has been obsessed with ownership, now pushing 70% of UK tenure, far higher than in most of Europe where renting - public or private - lacks the taint of failure it carries here.

But, as the crisis over the dysfunctional mortgage market deepened (125% mortgages constituted built-in negative equity), renting suddenly looked a better, often necessary option. Last month the housing minister, Margaret Beckett, signalled greater freedom for councils to keep more money (from rents and sales) and thus resume the building programmes for which they were once famous.

Not enough, says the council housing group of Labour MPs (chairman: Austin Mitchell), which is staging an inquiry at Westminster today to persuade Beckett's current review of council housing finance (horribly complicated) that now is the time to spend billions on "a third generation of first-class council homes (as) political and economic sense."

Unsurprisingly Gordon Brown's ministers and housing campaigners agree. Even before the recession, which threatens 400,000 construction jobs, they were already committed to building 3 million new homes by 2020 to meet demands of the poor, old and single, plus "affordable" family homes, thereby easing the basic shortage which Brown's expert, Kate Barker, said had contributed to soaring prices and consequent economic instability. Since soaring prices went into reverse Brown and Alistair Darling have been forced to intervene to rescue a range of schemes - not least collapsing public/private partnerships and housing associations projects hit by the collapse of private finance. Councils lose revenue too when that happens.

This week Barker's 2020 group urged ministers to help pump-prime the flagging economy by injecting £6bn into social housing, most of it by non-profit housing associations, whatever Austin Mitchell's group says. Yesterday MPs on the communities and local government select committee which monitors the work of Beckett and her boss, Hazel Blears, concurred: do more now to address what it politely called "the historic backlog" - or Labour's failure to build, as David Cameron puts it.

Unlike the Tories the MPs do not want building standards relaxed to meet the needs of 4.5 million people on the waiting list. But Labour has got some things right, including the new Homes and Communities Agency which is starting to bring coherence to funding. Where CLG still fails is in actually implementing all its hyperactive initiatives, moves to stop home repossessions for example.

Above all, ministers have to prod or bully banks into lending again. No social housing, no private estates or ambitious partnership scheme for urban regeneration will move far until the liquidity crisis eases - and all those frozen funds start flowing again.